A global fund is a type of investment fund whose investment policy is not precisely defined.
Investment funds are required to publish brochures detailing information about them. One of the most important sections of the brochure is the fund’s investment policy.
That is, mainly, where it invests and in what proportions it does.
Global fund definitions range from those who say that the investment policy of a global fund is non-existent to those who dictate that it is simply a flexible investment policy.
Why do global funds exist?
The idea behind these types of funds is frankly simple. When an investment fund establishes a certain investment policy, it is obliged to comply with it. But what if market circumstances do not allow optimizing management with such investment policy? Hence the idea of global background.
For example, a mixed fund that establishes that its portfolio will consist of 50% Chilean bonds and 50% Argentine shares. Obviously, the fund manager will choose those bonds that he thinks are best within Chileans. And, at the same time, those Argentine actions that you see with more potential.
However, it may be that due to economic circumstances it is better to invest in shares of another country or a higher percentage in bonds of the established one.
Thus, a global fund is based on the idea of what will always be invested in those assets that generate a return in line with the risk of better characteristics. Regardless of the geographical area or type of asset.
Global fund types
Global funds, as we have already indicated, do not have their investment policy defined. That is why it does not make much sense to classify them.
Today a global fund may be investing 90% in bonds and within two years not investing anything in bonds. In any case, global funds usually establish the occasional guideline on the orientation of their investment:
- Geographic area:Some funds, despite being global, establish areas of action. For example, investment in euro zone economies.
- Type of product: Theyestablish types of products with which they work. Thus, some will not use financial derivatives for hedges and others will. For example, use of financial options to minimize risk in certain situations.
- Portfolio composition: They donot usually establish fixed percentages, but to guide the investor they can establish some percentages for certain assets. For example, never more than 90% will be invested in fixed income.
- Time horizon:Within the global funds there are short-term and other medium and long-term funds.
Finally, it should be mentioned that global funds usually have higher levels of risk in their investments. Which does not mean that they cannot get good results. But simply that there is greater uncertainty in its results.